2.2 Organizational Structure

What is an organizational structure? The internal, formal framework of a business that shows the way in which management is organized and how authority is passed through the organization.

Formal Structure Indicates who has OVERALL responsibility of decision-making Relationships between people working for an organization How authority is passed down (chain of command) The number of subordinates reporting to managers (span of control) Channels of communication Identify workers’ supervisors or managers

Traditional Structure Has layers with fewer and fewer people on each higher levels.

Advantages Power starts at the top and works down or authority maybe passed down Divisions can be based on departments, geographic regions, or product category The levels of promotion are clear for employees The role of each employee is clear. Clear chain of command. President VP SalesVP FinanceVP Mfg Manager Sales Rep Accountant Plant Supervisor

Disadvantages President VP SalesVP FinanceVP Mfg Manager Sales Rep Accountant Plant Supervisor What are some disadvantages you can think of with this structure?

Disadvantages Top to bottom communication is typical and not usually efficient Horizontal communication is usually limited creating tunnel vision Is often inflexible and leads to resistance of change – managers defend their “turf” and position in the hierarchy

Tall Organizations Communication tends to be slow Span of Control is narrow Sense of remoteness at lower levels President VP SalesVP FinanceVP Mfg Manager Sales Rep Accountant Plant Supervisor

Flat Organizations Few hierarchical levels Wider span of control President Plant Mgr VP SalesVP FinanceVP MfgPlant Mgr

Delayering Removal of one or more of the hierarchy from an organizational structure AdvantagesDisadvantages Reduces business costsOne-off costs- Redundancy payments (severance pay) Shortens the chain of command and should improve communication Increased workloads for those that remain Increases span of control & opportunities for delegation Fear of redundancy used to cut costs threatens security of workforce May increase motivation by less remoteness from top layers & more quality work to perform

Basic Organizational Vocabulary Delegation  Passing authority down the organizational hierarchy Accountability  The obligation of an individual to account for their activities and disclose results in a transparent way

Delegation & Accountability AdvantagesDisadvantages Gives senior management more time to focus strategic roles. If task is not well defined or training inadequate, success in unlikely. Shows trust and and can be motivating and challenging. Insufficient authority given to subordinate to perform the task will result in task failure. Develops and trains staff for more senior positions. Managers sometimes delegate only the boring jobs. Encourages staff to be accountable.

Other types Bureaucracy: An organizational system with standardized procedures and rules. Typical in governmental structures. Centralization: Keeping all of the important decision- making powers within head office or center of the organization. Typical to maintain corporate image or brand. Decentralized: Decision-making powers are passed down to empower subordinates or regional managers. Typical when multinationals allow for cultural or regional differences.

Centralized/Decentralized Advantages - CentralizedAdvantages - Decentralized A fixed set of rules and procedures; there is little room for discussion. Local decisions reflect local conditions and customer needs. Consistent policies. Prevents conflicts between divisions and avoids confusion. Junior managers develop skills for more senior positions. Senior management considers the whole business not just one division. Empowerment at lower levels will have positive motivation effects. Central buying should allow for economies of scale. Decision-making is quicker and more flexible. Senior managers will be experienced decision-makers.

Hierarchical Structure Can be organized by: Product Function Region CEO Food Medicin e Clothin g Entertai nment CEO Human Resource s Operation s Marketing Accounti ng CEO AfricaAsiaEurope Americ a

Matrix Structure (Tom Peters) An organizational structure that creates project teams that cut across functional departments. This method is usually task or project focused. Finance Dept Production Dept Marketing Dept Human Resources Research & Development Project Team 1 Project Team 2 Project Team 3

Matrix Structure AdvantagesDisadvantages Communication between all departments on a project or task. Less control from the top. Less chance of focusing on what is good for “my” department. Junior managers may have authority that is difficult for more senior managers to handle. Increase chance of focusing on what is good for the project or task. Faster reaction to new situations may be resisted by senior managers. More successful solutions created by cross- over ideas from many people who are specialists in their fields. Team members may have 2 leaders – the team/project leader and the original hierarchy leader. New project teams can be created quickly to address changing markets or business needs.

Factors of Structure Size of business Style of leadership Retrenchment causes flattening of organizational structure for cost savings Corporate objectives – expanding to new markets New technologies can make current employee types obsolete

Why are organizational structures changing? Employees are better qualified and more knowledgeable Multinational organizations can take local factors into account Communication is quicker and faster Today’s organizations need leaders and team efforts

Charles Handy’s Shamrock Core Workers Strategists, knowledge, and core processes Flexible Workers Part-timers, contractors, consultants Outsourced Work IT or MIS, marketing, payroll, training, franchising Flexible Future: Fluid structure with few horizontal boundaries for rapid response to change.

Communication And Human Resource Management

Effective Communication The exchange of information between people or groups with feedback Sendor Aim of Communication Appropriate Language or Medium Response BARRIERSBARRIERS Feedback to Sendor The response to a message by the receiver. Message Receiver Understands the message

Why is effective communication important? Effective communication will aid motivation Can enhance problem solving Speed of decision-making Speed of response to market changes Reduces risk of errors Effective coordination between departments

Communication: Cultural Communicating across is CHALLENGING due to knowledge, rules, beliefs, and values that are absorbed at a young age. Sequential cultures: Give full attention to one agenda item after another. (North America, UK, Germany, Sweden) Synchronic cultures: The flow of time (past, present, future) are all interrelated. Deadlines and strategic thinking are impacted. (South America, Southern Europe, Asia)

Communication: Reason & Emotion Reason and emotion play a key role in communication. Neutral cultures: Do not show emotion in business dealings but keep them carefully subdued. (Japan, Indonesia, the UK, Norway and Netherlands) Emotional cultures: Emotions are shown by freely laughing, smiling, or perhaps scowling or walking out of the room. (Italy, France, USA, and Singapore)

Communication: Technological Innovation Mobile phones, iPads, networks, intranet/internet, cloud computing, and social media like Facebook and Twitter Drawbacks: Staff training Reduces social contact and promotes isolation Security Issues Information Overload